David, in my 15 years as a subscriber I have developed great respect for you. Over this period of time I have spent gobs of money on news letters, services etc. And I have become what I believe to be a pretty successful money manager in my own right. Fuller Treacy Money is the only outside research / commentary I still use all these years later. I'll argue any day of the week that Dennis Gartman should be a plumber and you should be on CNBC (or Eoin). 

That all being said, this is a bell you have rung more often than I can remember. I will ask you the same thing I have asked you every other time, "what are you seeing on the charts that tells you this?"  It's not possible that you are caught up in the day to day media driven noise. You must be seeing something I'm not because there is nothing in the rates charts that shows this to be true.  Even with this huge well advertised move in the long end, we are at no higher yields than multiple bottoms last year. 

I'm not saying it's not true, and that this is the bell for the downward break, but the charts don't reflect that. We are firmly in support. If support is broken, than yes, I'll be selling rates. But as far as I'm concerned this looks like the same buying opportunity we had last year. 

I'll respect you just as much either way :+)

David Fuller's view

Many thanks for your long interest in our service and the informative reports which you also provide.

Thanks also for a good question of general interest.  I think subscribers pay us to anticipate, sensibly, rather than just point out confirmation of trend reversals, which on this 10-year T-Bond chart would probably require a sustained break above 3% to 4% over the potentially lengthy medium term. 

So why the earlier warnings which did not work out?  I think we saw clear evidence of base development between May 2003 and up until June 2007, characterised by a steep decline followed by higher reaction lows.  However, that recovery quickly unravelled with the onset of the severe credit crisis recession, which broke the rising lows on the yield chart, and QE helped to drive yields to record or near-record lows. 

The percentage volatility increase that we have been seeing on this historic semi-log chart above is a bottoming characteristic.  It is also an approximate upside down mirror image of the topping activity shown between February 1980 and June 1984. 

At this point I have to ask, are we likely to see a repeat of the 2008 credit crisis or just an interminably long slump, à la Japan?  Theoretically, anything is possible but I doubt it, not least because the Fed threw an enormous amount of QE at the economy to prevent destructive deflation.  Instead, we have mostly positive deflation coming from technology.  Over six years since the credit crisis recession, I am now looking for further evidence of economic recovery.  More importantly, so is the Fed.